Returns to scale

Returns to scale refer to how the output of a production process changes when all inputs are increased by the same proportion. If doubling the inputs results in more than double the output, this is called increasing returns to scale. If the output is less than double, it's called decreasing returns to scale. If the output doubles precisely, it’s constant returns to scale. Understanding this concept helps businesses and economists analyze efficiency and scalability in production, informing decisions about growth and resource management.